The headline from the non-farm payrolls report was high at +311K compared to +205K expected but details of the report, including the unemployment rate and wage growth were below expectations. That's led to a small relief rally in equities with S&P 500 futures up 14 points, or 0.4%.
The dollar is broadly weaker as well and the market has shifted to forecasting a 25 bps hike from 50 bps. When Powell hinted at 50 bps earlier this week, the odds rose above 70% but he walked that back a bit, putting the emphasis back on data and with the turmoil in the banking sector, the market now thinks there's a good chance the Fed will take it slow. The implied odds of 50 bps are down to 36% with the remainder on 25 bps.
One line of thinking is that the Fed would hike until something breaks, with Silicon Valley Bank in dire straights, we may have hit the limit.
Looking further out, the Fed's terminal peak is now at 5.38% from 5.68% earlier this week -- that's more than a 25 bps cut.
